Allocating permitting responsibilities in the delivery chain
July 2022

Allocating permitting responsibilities in the delivery chain

The timely issuance of public permits and licenses has a direct influence on the project time schedule. A supplier that has accepted responsibility for licensing will have to compensate for the consequences of late delivery if the delay is due to licensing issues. For contractors it is an important decision whether to apply for the necessary licenses themselves or to hand these responsibilities down to subcontractors. Here, the apparently easiest solution is not always the best.

Most industrial projects depend on a variety of public permissions and licenses, such as

land use planning and building permits

Environmental Impact Assessment and environmental permits

licences for landscaping measures, mobilisation of the site and waste disposal procedures;

import and transport licences which may possibly be required; or

licenses for the storage and handling of dangerous goods

It is not always feasible to shift responsibility for licence procedures to sub-suppliers. After all, if any delays occur in the licensing process, this commonly leads to a standstill in the whole project. Even more fatal are the consequences if a necessary license is simply forgotten. A subcontractor will not be likely to be able to carry these consequences under its contractual liability.

The general contractor, as well as any contractor down the delivery chain should consider independently which licences will be needed, what is the quickest and most effective way to obtain them, and how much time should be allowed for the process. One should not make assumptions on these issues based on experiences in one’s home country.

Various issues have a bearing in this regard:

Often the party who has the best technical know-how will also be in a position to prepare application procedures effectively.

On the other hand, a local company acting as applicant might be the most effective door-opener.

The applicable public law may restrict the group of possible applicants.

Some licences can be applied for by way of a simplified procedure if the applicant already holds certain general licences. General operation licences often include licences for transport and storage of dangerous goods, whereas an applicant not holding an operation licence would have to run through the full procedure.

In order to protect business secrets, one will often have an interest in the centralised handling of applications.

The issues noted above may sometimes point in different directions. The most effective solution may demand a tailored division of responsibilities in which the internal responsibility is borne by one party, but the external representative function is fulfilled by the other.